U.S. Economy to Lose Further Momentum Before 2025 Recovery, Leading Indicators Say

By Ed Frankl

U.S. economic growth faces further challenges, a monthly series of indicators said, as gloomy consumer expectations persist, despite more interest-rates cuts to support activity still to come.

The Conference Board said Thursday that its Leading Economic Index, or LEI, fell 0.2% in August, almost matching the 0.3% decline expected by economists polled by The Wall Street Journal.

The leading index has fallen for six months straight, although the rate of decline has moderated since last year, The Conference Board said.

The decline, which signals headwinds to economic growth ahead, was driven by weakening new orders, which recorded its lowest value since May 2023, said Justyna Zabinska-La Monica, senior manager for business-cycle indicators at The Conference Board.

"A negative interest-rate spread, persistently gloomy consumer expectations of future business conditions, and lower stock prices after the early-August financial market tumult also weighed on the index," she added.

But while The Conference Board expects U.S. real GDP growth to lose momentum in the second half of this year, Federal Reserve rate cuts, including this week's half-point cut, should lower borrowing costs and support stronger economic activity in 2025, it said.

The LEI is a predictive variable that anticipates turning points in the business cycle by around seven months. The indicator is based on 10 components, among them manufacturers' new orders, initial claims for unemployment insurance, building permits of new private housing units, stock prices and consumer expectations. It is intended to signal swings in the business cycle.

Write to Ed Frankl at edward.frankl@wsj.com

(END) Dow Jones Newswires

September 19, 2024 10:38 ET (14:38 GMT)

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